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Griffon Corporation Announces Second Quarter ResultsGriffon Corporation ("Griffon" or the "Company") (NYSE:GFF) today reported results for the fiscal second quarter ended March 31, 2016. Revenue totaled $500.1 million, consistent with the prior year quarter; excluding the impact of foreign currency, revenue increased 2%. Telephonics Corporation ("Telephonics") and Home & Building Products ("HBP") revenue increased 7% and 6%, respectively, over the prior year quarter, while Clopay Plastic Products Company, Inc. ("PPC") revenue decreased 17%. Segment adjusted EBITDA totaled $48.6 million, increasing 9% from the prior year quarter; the impact of foreign currency was not material. Segment adjusted EBITDA is defined as net income excluding interest income and expense, income taxes, depreciation and amortization, unallocated amounts (mainly corporate overhead), restructuring charges and acquisition-related expenses. Net income totaled $6.1 million, or $0.14 per share, compared to $5.1 million, or $0.11 per share, in the prior year quarter. The impact of foreign currency and discrete tax items was not material. Ronald J. Kramer, Chief Executive Officer, commented, "We reported strong second-quarter earnings per share growth of 29%. Our Home and Building Products segment increased its EBITDA by 52% demonstrating the success of our strategic initiatives. We continue to build our businesses for long-term value enhancement through the expansion of our Clopay door facility in Troy, Ohio and the recently announced $50 million investment in Clopay Plastics Sof-flex® breathable film. We expect to build on our earnings momentum for the rest of Fiscal 2016 and the future." Segment Operating Results Home & Building Products Revenue totaled $279.2 million, increasing 6% compared to the prior year quarter. Excluding a 2% unfavorable foreign currency impact, revenue increased 8% compared to the prior year quarter. The AMES Companies, Inc. ("AMES") revenue increased 4% due to improved U.S. snow tool, garden tool and pot and planter sales; foreign currency was 3% unfavorable. Clopay Building Products Company, Inc. ("CBP") revenue increased 8%, due to increased volume and favorable product mix; foreign currency did not have a material impact on CBP revenue. Segment adjusted EBITDA was $26.3 million, increasing 52% compared to the prior year quarter, driven by increased sales, operational efficiency improvements and cost control measures at AMES, and increased volume, favorable product mix and decreased material costs at CBP; foreign currency was 3% unfavorable. Telephonics Revenue totaled $105.9 million, increasing 7% from the prior year quarter, due to mobile ground surveillance systems, secured digital intercommunication systems and contract manufacturing of dismounted Electronic Countermeasure systems, partially offset by decreased revenue from certain maritime surveillance radar systems. Segment adjusted EBITDA was $10.4 million, decreasing 10% from the prior year quarter and margin decreased 190 basis points, driven by the timing of work performed on maritime surveillance radar systems, partially offset by the timing of research and development expenses. Contract backlog totaled $446 million at March 31, 2016, compared to $442 million at September 30, 2015, with approximately 76% expected to be fulfilled within the next twelve months. Plastic Products Revenue totaled $115.0 million, decreasing 17% compared to the prior year quarter, due to reduced volume of 12% driven by lower North American baby care orders, a $5.5 million or 4% unfavorable foreign currency impact, and a 1% unfavorable impact from the pass through of resin costs in customer selling prices. PPC adjusts selling prices based on underlying resin costs on a delayed basis. Segment adjusted EBITDA was $11.8 million, decreasing 25% from the prior year quarter driven by decreased volume, and the change in the impact of resin pricing pass through of $1.7 million, partially offset by favorable product mix; foreign currency had no material impact on EBITDA for the quarter. During April 2016, PPC announced a $50 million Sof-flex® breathable film investment which expands breathable film capacity in North America, Europe and Brazil, increases our extrusion and print capacity, and enhances our innovation and technology capabilities. We expect the project to be completed in late calendar 2017. These investments will allow PPC to maintain and extend its technological advantage and allow us to differentiate ourselves from competitors, while meeting increasing customer demand for lighter, softer, more cost effective and more environmentally friendly products. In addition, PPC expects to record approximately $5 million in restructuring charges in the third quarter of 2016. The charges are primarily related to headcount reductions at PPC's Dombuhl, Germany facility, other location headcount reductions and for costs related to the shut down of PPC's Turkey facility. The Dombuhl charges are related to an optimization plan that will drive innovation and enhance our industry leading position in printed breathable backsheet. The facility will be transformed into a state of the art hygiene products facility focused on breathable printed film and siliconized products. In conjunction with this effort, our customer base will be streamlined, and we will dispose of old assets and reduce overhead costs, allowing for gains in efficiencies. Taxes In both the quarter and six months ended March 31, 2016 and 2015, the Company reported pretax income, and recognized tax provisions of 38.0% and 36.6% for the quarter and six months ended March 31, 2016, respectively, compared to 37.5% and 37.7%, respectively, in the comparable prior year periods. Excluding discrete items, the effective tax rates for the six months ended March 31, 2016 and 2015 were 38.2% and 35.2%, respectively. The current and prior year quarters included certain de minimis discrete tax items. Balance Sheet and Capital Expenditures At March 31, 2016, the Company had cash and equivalents of $54.3 million, total debt outstanding of $941.8 million, net of discounts and issuance costs, and $212 million available for borrowing, subject to certain loan covenants, under its revolving credit facility. Capital expenditures were $20.9 million in the current quarter. On March 22, 2016, the Company amended it revolving credit agreement to increase the maximum borrowing availability from $250 million to $350 million, extend its maturity date from March 2020 to March 2021, and modify certain other provisions of the facility. Share Repurchases In each of March and July 2015, Griffon's Board of Directors authorized the repurchase of up to $50 million of Griffon's outstanding common stock. Under these programs, the Company may purchase shares in the open market, including pursuant to a 10b5-1 plan, or in privately negotiated transactions. During the quarter ended March 31, 2016, Griffon purchased 1,516,919 shares of common stock under the programs, for a total of $22.7 million or $14.97 per share. At March 31, 2016, $28.0 million remained under existing Board authorizations. From August 2011 to March 31, 2016, Griffon repurchased 18,700,559 shares of its common stock for a total of $233.1 million or $12.46 per share. Conference Call Information The Company will hold a conference call today, May 4, 2016, at 4:30 PM ET. The call can be accessed by dialing 1-888-505-4328 (U.S. participants) or 1-719-325-2278 (International participants). Callers should ask to be connected to the Griffon Corporation teleconference or provide conference ID number 5838439. A replay of the call will be available starting on May 4, 2016 at 7:30 PM ET by dialing 1-877-870-5176 (U.S.) or 1-858-384-5517 (International), and entering the conference ID number: 5838439. The replay will be available through May 18, 2016. Forward-looking Statements "Safe Harbor" Statements under the Private Securities Litigation Reform Act of 1995: All statements related to, among other things, income (loss), earnings, cash flows, revenue, changes in operations, operating improvements, industries in which Griffon operates and the United States and global economies that are not historical are hereby identified as "forward-looking statements" and may be indicated by words or phrases such as "anticipates," "supports," "plans," "projects," "expects," "believes," "should," "would," "could," "hope," "forecast," "management is of the opinion," "may," "will," "estimates," "intends," "explores," "opportunities," the negative of these expressions, use of the future tense and similar words or phrases. Such forward-looking statements are subject to inherent risks and uncertainties that could cause actual results to differ materially from those expressed in any forward-looking statements. These risks and uncertainties include, among others: current economic conditions and uncertainties in the housing, credit and capital markets; the Griffon's ability to achieve expected savings from cost control, integration and disposal initiatives; the ability to identify and successfully consummate and integrate value-adding acquisition opportunities; increasing competition and pricing pressures in the markets served by Griffon's operating companies; the ability of Griffon's operating companies to expand into new geographic and product markets, and to anticipate and meet customer demands for new products and product enhancements and innovations; reduced military spending by the government on projects for which Griffon's Telephonics Corporation supplies products, including as a result of continuing budgetary cuts resulting from sequestration and other government actions; the ability of the federal government to fund and conduct its operations; increases in the cost of raw materials such as resin, wood and steel; changes in customer demand or loss of a material customer at one of Griffon's operating companies; the potential impact of seasonal variations and uncertain weather patterns on certain of Griffon's businesses; political events that could impact the worldwide economy; a downgrade in the Griffon's credit ratings; changes in international economic conditions including interest rate and currency exchange fluctuations; the reliance by certain of Griffon's businesses on particular third party suppliers and manufacturers to meet customer demands; the relative mix of products and services offered by Griffon's businesses, which could impact margins and operating efficiencies; short-term capacity constraints or prolonged excess capacity; unforeseen developments in contingencies, such as litigation and environmental matters; unfavorable results of government agency contract audits of Telephonics Corporation; Griffon's ability to adequately protect and maintain the validity of patent and other intellectual property rights; the cyclical nature of the businesses of certain Griffon's operating companies; and possible terrorist threats and actions and their impact on the global economy. Such statements reflect the views of the Company with respect to future events and are subject to these and other risks, as previously disclosed in the Company's Securities and Exchange Commission filings. Readers are cautioned not to place undue reliance on these forward-looking statements. These forward-looking statements speak only as of the date made. Griffon undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. About Griffon Corporation Griffon Corporation is a diversified management and holding company that conducts business through wholly owned subsidiaries. Griffon oversees the operations of its subsidiaries, allocates resources among them and manages their capital structures. Griffon provides direction and assistance to its subsidiaries in connection with acquisition and growth opportunities as well as in connection with divestitures. In order to further diversify, Griffon also seeks out, evaluates and, when appropriate, will acquire additional businesses that offer potentially attractive returns on capital. Griffon currently conducts its operations through three reportable segments:
For more information on Griffon and its operating subsidiaries, please see the Company's website at www.griffon.com.
Griffon evaluates performance and allocates resources based on each segment's operating results before interest income and expense, income taxes, depreciation and amortization, unallocated amounts (mainly corporate overhead), as applicable ("Segment adjusted EBITDA"). Griffon believes this information is useful to investors. The following table provides a reconciliation of Segment adjusted EBITDA to Income before taxes:
The following is a reconciliation of each segment's operating results to Segment adjusted EBITDA:
Unallocated amounts typically include general corporate expenses not attributable to any reportable segment.
Griffon evaluates performance based on Earnings per share and Net income excluding discrete tax items, as applicable. Griffon believes this information is useful to investors. The following table provides a reconciliation of Net income to adjusted net income and earnings per share to Adjusted earnings per share:
Note: Due to rounding, the sum of earnings per common share and adjusting items, net of tax, may not equal adjusted earnings per common share.
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